| MADRID, March 7
MADRID, March 7 Spanish lender Santander
has sold a package of 300 million euros ($393 million)
of troubled consumer loans to a U.S. hedge fund at a massive
discount, the latest sign that Spain's banks are increasing
efforts to clear their books.
Elliott Management, a fund that specialises in buying
distressed assets, paid 12 million euros for the portfolio, for
a 96 percent discount, a source with knowledge of the
transaction said on Thursday.
Elliott and Santander declined to comment on the deal.
It was the latest in a string of heavily discounted
disposals by Spanish banks, which are starting to shift
problematic assets as they clean up their books after taking a
big hit from writedowns on soured property deals last year.
In particular, portfolios of consumer credits gone bad have
been among the easiest to sell, as the loans are unsecured and
offer banks a lesser chance of recovering money or assets from
struggling borrowers and the banks are willing to part with them
for small amounts.
Troubled consumer credits, particularly those that have been
in arrears for 12 months of more, are also often already
provisioned for at 100 percent, easing the pain for the banks
"We're seeing more of these deals happening now, whether
it's consumer loans, loans to small businesses or credit card
portfolios. These are often completely provisioned for or
already off banks' balance sheet," said a Madrid-based
investment banker advising on such transactions.
Mid-sized lender Liberbank in February sold 574 million
euros worth of failed loans for 3.7 percent of face value to
another U.S. fund, Cerberus.
International funds such as Lone Star and Fortress are also
among those circling assets, including portfolios of mortgages,
several bankers said.
Distressed debt funds can make money on the assets, in part
because they buy them so cheaply. They can offer struggling
borrowers deals, such as writing off the remainder of a loan in
exchange for a small upfront repayment, when banks cannot, said
another banker familiar with such deals.
"These funds are real specialists in handling these assets.
They can also take their time about it, which helps them recover
money over the long term," said the banker, who declined to be
named because of the sensitivity of the transactions.
Elliott, which has some $20.7 billion euros in assets, is
not known, at least publicly, to have completed many such
purchases in Spain yet.
The fund is best known for its aggressive legal tactics
against countries whose debt it has bought cheaply. In
particular, it has waged a long-running battle against Argentina
to get money back after buying debt the country defaulted on in
($1 = 0.7644 euros)
(Editing by Julien Toyer and Dan Grebler)